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Club News

Chairman's Chat

An Update From Simon Hallett

26 August 2020

It has been a long time since my last letter.

I have been waiting for the external environment to settle down so I could talk about the new season. Sadly, very little has been settled, so we are still, at least to some extent, wandering in the dark.

Mainly, of course, we do not know what will happen with the virus and a potential vaccine. This makes it difficult to plan, and budget for next season, as there will always be the risk that football gets shut down again or that crowds, having been admitted, are again not allowed.

While we don’t yet know when, or in what numbers, fans will be permitted to return to the stadium, we are working very hard to make sure Home Park complies with the protocols laid down by the EFL under advice from the government. However many fans are allowed in, we will work closely with the city council’s safety group to make sure they are as safe as can be.

We do now know what matches are planned and when. It is a very tight schedule, and there is little flexibility to address the one-off accidents that happen every year. Last year alone, and from memory, we had two home, and one away, matches postponed. We also know that we will be subject to a cap on football wages we can pay, and on squad size. I will talk more about the cap later, but note that this is a transition year, so you may hear cases of clubs apparently in breach of the £2.5 million cap that applies in Sky Bet League One.

Our spending on the first-team will be below or at the cap this year, but this is by coincidence - we were reluctant to spend more given the lack of revenues at the start of the season (when we play behind closed doors and are limited in the hospitality we can provide) and the risk that even those revenues disappear again later in the year.

We have big hopes for the streaming services we can offer our fans. We will be able to offer streamed home games to our season ticket holders at no extra charge, and match day passes for both home and away matches to anyone who would like to watch those matches in their own homes.

Although we were the only club in Sky Bet League Two to offer multi, rather than single-camera coverage, we have had a number of reliability problems and supporter feedback was duly noted.

Indeed, the annual supporter survey conducted by the Argyle Fans’ Trust suggested that only 55% of supporters were satisfied with the quality of the iFollow product. So, it was clear that we had to act on this feedback to ensure that iFollow is efficient, high-quality, and reliable.

Immediately after lockdown was eased, we formed a working group to examine our TV and streaming infrastructure at Home Park. The group undertook extensive research, collaborating with a variety of clubs across all three EFL leagues. As a result, and after a lack of investment over many years, the board recently authorised a significant spend on equipment and work to ensure Argyle will provide an improved and professional iFollow service, not just during the ‘behind closed doors’ period, but for the longer-term future.

Unfortunately, before we could make that investment, using our old, and aging, infrastructure, our initial experiment with a free stream of the Plymouth Parkway friendly was a disaster, for which we’ve already given our apologies. Rest assured that this was a blip rather than an indication of the quality of the product that will be available for the start of the season.  We think that live streaming of matches is an important service for Argyle supporters who are unable or are understandably reluctant to attend matches at Home Park. It will also provide an important source of revenues for the club.

More information on the service will be forthcoming, but please do not think the Parkway failure reflects a “shambles” at the club. Your club is now well-managed, but will occasionally make mistakes. Some of those will not be justified, but some will. Despite the disappointing result, to experiment with free streaming of the Parkway match was a good decision. We took a risk, and it did not pay off. It was still worth trying.

Football clubs are usually too conservative when it comes to trying new things, partly because fans so quickly pour abuse on club staff. Our values say that we will not tolerate abuse of our staff. Particularly at the moment, when many are on furlough, and we are trying desperately to husband our resources, we will not be able to offer the standard of services fans should expect in normal times, so we ask for your patience.

If you are an Argyle supporter, please support Argyle’s efforts, and support Argyle’s hard-pressed people. We are working hard and getting most things right. Having, for example, so-called supporters banging on the windows of our ticket office and hurling abuse at our staff is unacceptable and makes me wonder for what the “support” in supporter stands.

My (used three times now) Father of the Bride speech includes the admonition to take risks and not to be afraid to fail – if you have not failed occasionally, you have not risked often enough. Argyle will continue to take risks, and some of those risks will lead to failure. Please support the principle and tolerate the failures as you enjoy the successes. For example, we have experimented with turning Home Park into a socially-distanced restaurant, offering dining and afternoon tea within sight of the pitch. It has been a huge success.

We are waiting to hear news from the EFL of a financial package to replace revenues lost by having to play behind closed doors (and not being able to play nine games at the end of last season). To date, the “rescue” offers have been gratefully received, but only address the timing of cash flows, not that so many revenues have been lost forever. The packages have deferred many of the costs that clubs owe, and accelerated payments they are due to receive. That is helpful, but does not solve the underlying problem. It is as if you ask your boss for wages two weeks early. It helps for the next two weeks, but then you have to ask again…and again.

Eventually, you need permanent revenue from elsewhere, or to cut your spending dramatically. There have been some signs that clubs have cut spending, but not as many as we had expected. There is no doubt that upwards pressure on our biggest cost—player wages—is over for the foreseeable future, but the packages to help clubs’ cash flow appear, in many cases, to have gone into funding long-term contracts for players. That is not the case with Argyle.

I injected £3.5 million in new funds into Argyle in July. That money is now sitting in the bank and will be used to provide a cushion in the event of another case of massive loss of revenue. It is the last injection I will make into Argyle. If we lose revenue and have spent that money, we will have to cut costs dramatically to avoid bankruptcy. So, by definition, Argyle is now financially sustainable, in that, should the cash cushion be used up, our outgoings will have to match our incoming revenues. That was always our medium-term goal, but the timing is not what we wanted. Because we are not in debt, if revenues should collapse, we could reduce our outgoings. It would not be pretty, but the club would survive.

Because of the inflation in player wages over the last few years, EFL clubs in Leagues One and Two have now introduced measures to tie the hands of owners continuously tempted to fund losses—often via loans that lead to bankruptcy when the owners lose the ability or willingness to keep funding those losses. That does not apply to Argyle. We have a small loan owed to Plymouth City Council, dating from the rescue in 2011, but I, and other shareholders, have funded the investments we have made and the losses we have tolerated in the last few years through investing in shares, not through making loans. We have done that because we do not like the risk that loans impose when revenues dry up. We did not expect them to dry up as much as they have done, of course.

At the same time, we have embarked on a long-term strategy of making investments that will expand our revenue base – the Mayflower Grandstand is the most obvious example, but we have also spent on people. High-quality people cost money. They are worth every penny, of course, as they help generate a better product and better services for our fans and help attract new fans. All of that helps increase the resources we have for spending on and investment in the various areas of the club, including, of course, but not restricted to, the first team.

Argyle is, in any case, blessed with a relatively large and loyal fan base, but, because we have more fans does not necessarily mean that we do not have fewer financial problems now. Getting those fans and keeping them costs money. In normal circumstances, those greater numbers generate greater revenues, but these are not normal circumstances. We are left with greater numbers of fans, but no revenues and still have the higher costs. We have better assets - our stadium, for example - than many clubs in Leagues One and Two, but those assets now just cost more to maintain and do not generate revenues.

Sadly, we have been forced to restructure parts of the club, resulting in some of our staff either working fewer hours, or, in some cases, being made redundant. Such decisions are hard, but must be made if we are to achieve anything close to financial security in these difficult times.

All this is to provide the background to talking about the salary cap. We voted against it, on the grounds that, as I explain above, our strategy has been based on investing in revenue -generating assets, so, in normal circumstances, we should be able to use those extra revenues to fund extra spending on our first team squad. Such extra spending should give us an advantage versus other clubs competing in League One.

That advantage though, is less obvious in League One than in League Two. League One has several clubs whose revenue from fans is more than ours, and, every season, three teams enter the league from the Championship with the financial benefit of parachute payments. So, we would have had an advantage versus some clubs in League One, but not versus many others.

Competitive advantage though is not just the result of the money you can spend. It is also a function of how you spend it—smartly, or foolishly. Here we think we can be better than most. We have begun the process of introducing structure and process to the decision-making about recruiting, using data to analyse and identify players whose skills are consistent with our playing philosophy, and who are available at good prices.

It is in some ways unfortunate that football is plagued with irrational decision-making, too much short-termism, and too much responsiveness to pressures from fans. A recent Netflix series about one of our League One competitors lays bare how difficult it is to make good long-term decisions under the short-term pressure that is on all football people.

That the rest of football is this way though is something we can exploit. We will try to be more disciplined, and to make sure that facts and our heads, not emotions, rule our decision-making. We are fortunate in having football people who recognise the importance of this strategy. We are also fortunate in having football people with knowledge and contacts in the game that we can also use to our advantage. The combination of good decision-making processes and experienced people with good judgement should enable us to compete effectively at this level. We will try to impact the league with our brains, not our wallets.

Having the salary cap removes the temptation to try to spend your way to success or out of trouble. I do not think we would have done that, and certainly would not do so now. If, though, we do return to anything like normal, we will have a constrained cost base, and a growing revenue base. That extra money can be used. We will be able to make investments in the stadium (you may even get that clock you all want!), in training facilities, and in the Academy. None of those would have a short-term pay off, but would all help build Argyle’s infrastructure for the future.

As I said, we voted against the salary cap, but I do not think the end result is as bad for Argyle as some have said and may turn out to be good for our long-term health.

Finally, let me say something about the Argyle Ladies’ team. Our Ladies’ side was formed out of a bankrupt local women’s club that needed help. It was under the umbrella of the Argyle Community Trust but operated independently. Since I became involved at Argyle, my wife and I have supported the club financially, and we have increasingly brought the Argyle Ladies closer to Argyle. We have hosted matches at Home Park, we have integrated social media, we have provided considerable support in terms of people and in terms of money.

We have not, however, taken control of the club. In future, though, we, via the Community Trust, will be running Argyle Ladies ourselves. I do not know at this stage what additional support we will be able to offer, but we will work on the club’s medium-term strategy and communicate further when ready. In the short run, the Ladies’ team carries on under new management.

Finally finally, the remaining uncertainty is about the first-team squad. Again, there may be more news by the time you read this, but we have not yet finished building it. The board asked the football team to be patient in acquiring new players and they have responded, gradually adding players as they became available at prices we thought fair under current circumstances. I am hopelessly biased, and speaking as fan, but it looks a good mixture of youth and experience and particularly strong going forward, consistent with the football philosophy we have laid down.

We are getting from Ryan and Schuey what they promised when they came to the club - attacking football and an emphasis on youth. I learned last year that all managers promise that! Few live up to their promises though, so I am delighted that Ryan and Schuey, helped by Kevin Nancekivell and Neil Dewsnip, are doing so.

If you wish to contact me, please email me at chairman@pafc.co.uk. I reply to every reasonable email I receive. I cannot guarantee replies to messages on other platforms. My judgement about reasonableness is final!

I am sorry to have gone on at such length. There is a lot going on, continuing uncertainty, and much to talk about. I hope we can do that in person some time. Until then, stay safe, stick to the rules and, please, take care of oldies like me by wearing a mask.

Thanks, as ever, for your support. It is what keeps us going in difficult circumstances.

Simon


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